G O O D
THE POWER
OF THE 4
FACTORIES
L I F E
PROF. DR. HARTMUT ESSLINGER TREND-TAG HAMBURG MAY 2008

Instead of concentrating on “brand identity”,
marketing has to shift its focus to the question
of the consumers’ identity.

WHAT ABOUT PRODUCTS?

Designers, executives and marketeers
could be a lot more creative
with their concepts and designs
because the factories in the Far East
are able to produce a lot more flexibly
than specialist circles realize.

BRAND SHIFTS

THE WORLD’s TOP 100 BRANDS 2007: by Economics
1. Google 26. Home Depot 51. UBS 76. Goldman Sachs
2. GE (General Electric) 27. SAP 52. Target Stores 77. T-Mobile
3. Microsoft 28. Gillette 53. ING 78. Colgate
4. Coca Cola 29. Mercedes 54. Canon 79. Subway
5. China Mobile 30. Oracle 55. Sony 80. Chanel
6. Marlboro 31. HSBC 56. Morgan Stanley 81. IKEA
7. Wal*Mart 32. Tesco 57. Chevrolet 82. Royal Bank of Scotland
8. Citi 33. ICBC 58. Nissan 83. VW Volkswagen
9. IBM 34. Verizon Wireless 59. Chase 84. Cartier
10. Toyota 35. Starbucks 60. Motorola 85. Hermes
11. McDonald’s 36. Honda 61. China Construction Bank 86. Best Buy
12. Nokia 37. Dell 62. Accenture 87. Barclays
13. Bank of America 38. Bank of China 63. Nike 88. Avon
14. BMW 39. Royal Bank of Canada 64. Harley Davidson 89. Gucci
15. HP 40. Porsche 65. Wachovia 90. Zara
16. Apple 41. Deutsche Bank 66. Budweiser 91. Washinton Mutual
17. UPS 42. eBay 67. Orange 92. Amazon
18. Wells Fargo 43. Yahoo 68. Marks & Spencer 93. BP
19. American Express 44. Samsung 69. FedEx 94. AIG
20. Louis Vuitton 45. Ford 70. AT&T / Cingular Wireless 95. ABN AMRO
21. Disney 46. L’Oreal 71. Siemens 96. Auchan
22. Vodafone 47. Banco Santander 72. State Farm 97. Asda
23. NTT DoCoMo 48. Pepsi 73. H&M 98. Lexus
24. Cisco 49. Carrefour 74. JP Morgan 99. Esprit
25. Intel 50. Merril Lynch 75. TIM 100. Rolex
Source: Milward Brown

THE WORLD’s TOP 100 BRANDS 2007: present or former frog clients
1. Google 26. Home Depot 51. UBS 76. Goldman Sachs
2. GE (General Electric) 27. SAP 52. Target Stores 77. T-Mobile
3. Microsoft 28. Gillette 53. ING 78. Colgate
4. Coca Cola 29. Mercedes 54. Canon 79. Subway
5. China Mobile 30. Oracle 55. Sony 80. Chanel
6. Marlboro 31. HSBC 56. Morgan Stanley 81. IKEA
7. Wal*Mart 32. Tesco 57. Chevrolet 82. Royal Bank of Scotland
8. Citi 33. ICBC 58. Nissan 83. VW Volkswagen
9. IBM 34. Verizon Wireless 59. Chase 84. Cartier
10. Toyota 35. Starbucks 60. Motorola 85. Hermes
11. McDonald’s 36. Honda 61. China Construction Bank 86. Best Buy
12. Nokia 37. Dell 62. Accenture 87. Barclays
13. Bank of America 38. Bank of China 63. Nike 88. Avon
14. BMW 39. Royal Bank of Canada 64. Harley Davidson 89. Gucci
15. HP 40. Porsche 65. Wachovia 90. Zara
16. Apple 41. Deutsche Bank 66. Budweiser 91. Washinton Mutual
17. UPS 42. eBay 67. Orange 92. Amazon
18. Wells Fargo 43. Yahoo 68. Marks & Spencer 93. BP
19. American Express 44. Samsung 69. FedEx 94. AIG
20. Louis Vuitton 45. Ford 70. AT&T / Cingular Wireless 95. ABN AMRO
21. Disney 46. L’Oreal 71. Siemens 96. Auchan
22. Vodafone 47. Banco Santander 72. State Farm 97. Asda
23. NTT DoCoMo 48. Pepsi 73. H&M 98. Lexus
24. Cisco 49. Carrefour 74. JP Morgan 99. Esprit
25. Intel 50. Merril Lynch 75. TIM 100. Rolex
Source: Milward Brown

THE WORLD’s TOP 100 BRANDS 2007: electronic products & e/retail
1. Google 26. Home Depot 51. UBS 76. Goldman Sachs
2. GE (General Electric) 27. SAP 52. Target Stores 77. T-Mobile
3. Microsoft 28. Gillette 53. ING 78. Colgate
4. Coca Cola 29. Mercedes 54. Canon 79. Subway
5. China Mobile 30. Oracle 55. Sony 80. Chanel
6. Marlboro 31. HSBC 56. Morgan Stanley 81. IKEA
7. Wal*Mart 32. Tesco 57. Chevrolet 82. Royal Bank of Scotland
8. Citi 33. ICBC 58. Nissan 83. VW Volkswagen
9. IBM 34. Verizon Wireless 59. Chase 84. Cartier
10. Toyota 35. Starbucks 60. Motorola 85. Hermes
11. McDonald’s 36. Honda 61. China Construction Bank 86. Best Buy
12. Nokia 37. Dell 62. Accenture 87. Barclays
13. Bank of America 38. Bank of China 63. Nike 88. Avon
14. BMW 39. Royal Bank of Canada
64. Harley Davidson 89. Gucci
15. HP 40. Porsche 65. Wachovia 90. Zara
16. Apple 41. Deutsche Bank 66. Budweiser 91. Washinton Mutual
17. UPS 42. eBay 67. Orange 92. Amazon
18. Wells Fargo 43. Yahoo 68. Marks & Spencer 93. BP
19. American Express 44. Samsung 69. FedEx 94. AIG
20. Louis Vuitton 45. Ford 70. AT&T / Cingular Wireless 95. ABN AMRO
21. Disney 46. L’Oreal 71. Siemens 96. Auchan
22. Vodafone 47. Banco Santander 72. State Farm 97. Asda
23. NTT DoCoMo 48. Pepsi 73. H&M 98. Lexus
24. Cisco 49. Carrefour 74. JP Morgan 99. Esprit
25. Intel 50. Merril Lynch 75. TIM 100. Rolex
Source: Milward Brown

THE WORLD’s TOP 100 BRANDS 2007: with own core factories
1. Google 26. Home Depot 51. UBS 76. Goldman Sachs
2. GE (General Electric) 27. SAP 52. Target Stores 77. T-Mobile
3. Microsoft 28. Gillette 53. ING 78. Colgate
4. Coca Cola 29. Mercedes 54. Canon 79. Subway
5. China Mobile 30. Oracle 55. Sony 80. Chanel
6. Marlboro 31. HSBC 56. Morgan Stanley 81. IKEA
7. Wal*Mart 32. Tesco 57. Chevrolet 82. Royal Bank of Scotland
8. Citi 33. ICBC 58. Nissan 83. VW Volkswagen
9. IBM 34. Verizon Wireless 59. Chase 84. Cartier
10. Toyota 35. Starbucks 60. Motorola 85. Hermes
11. McDonald’s 36. Honda 61. China Construction Bank 86. Best Buy
12. Nokia 37. Dell 62. Accenture 87. Barclays
13. Bank of America 38. Bank of China 63. Nike 88. Avon
14. BMW 39. Royal Bank of Canada
64. Harley Davidson 89. Gucci
15. HP 40. Porsche 65. Wachovia 90. Zara
16. Apple 41. Deutsche Bank 66. Budweiser 91. Washinton Mutual
17. UPS 42. eBay 67. Orange 92. Amazon
18. Wells Fargo 43. Yahoo 68. Marks & Spencer 93. BP
19. American Express 44. Samsung 69. FedEx 94. AIG
20. Louis Vuitton 45. Ford 70. AT&T / Cingular Wireless 95. ABN AMRO
21. Disney 46. L’Oreal 71. Siemens 96. Auchan
22. Vodafone 47. Banco Santander 72. State Farm 97. Asda
23. NTT DoCoMo 48. Pepsi 73. H&M 98. Lexus
24. Cisco 49. Carrefour 74. JP Morgan 99. Esprit
25. Intel 50. Merril Lynch 75. TIM 100. Rolex
Source: Milward Brown

Brand owners and OEMs
have damaged their business
by giving away their original competences
for short-term gains.
A BIRTHRIGHT FOR A LENTIL SOUP

OEMs design Me-Too products
with limited profits because the real opportunity
for Innovation and Marketing is neglected
in favor of “safe designs” which are defined
by fears and muted requests.
Then they are downgraded by acceptance testing.
A BIRTHRIGHT FOR A LENTIL SOUP

Most designs forwarded
by Brand owners to ODMs
also don’t have “Factory-Smartness”:
neither anymore in design
nor in business acumen
(e.g. 60 – 40% procurement).
A BIRTHRIGHT FOR A LENTIL SOUP

Result:
both conceptual improvements
and potential cost-savings by meaningful innovation
are close to impossible.
A BIRTHRIGHT FOR A LENTIL SOUP

The power center in the Industrial
Consumer Technology Business
has shifted to the Customer(s)
and to the Factories (ODMs and ECMs).
The OEMs & Brands are lost between.
OEM = Original Equipment Manufacturer / Brand Owner
ODM = Original Design Manufacturer / Design & Product Owner
ECM = Electronic Contract Manufacturer / Process Owner
THE SEISMIC SHIFT

The Power is with the Factories.
Akio Morita
THE FORGOTTEN TRUTH

FACTORY SHIFTS

SOME OF THE WORLD’s TOP ELECTRONIC MANUFACTURERS
Hon Hai / Foxconn
Flextronics / Solectron
Compal
Inventec
Quanta
Mitec
Wistron
Arima
Clevo
NEC
….

SOME OF THE WORLD’s TOP ELECTRONIC MANUFACTURERS
Hon Hai / Foxconn
Flextronics / Solectron
Compal
Inventec
Quanta HP
Mitec Dell
Wistron Apple
Arima
Clevo
….

SOME OF THE WORLD’s TOP ELECTRONIC MANUFACTURERS
Hon Hai / Foxconn
Flextronics / Solectron
Compal
Inventec
Quanta HP
Mitec Dell
Wistron Apple
Arima
Clevo
NEC
….

SOME OF THE WORLD’s TOP ELECTRONIC MANUFACTURERS
Hon Hai / Foxconn
Flextronics / Solectron
Compal
Inventec
Quanta HP
Mitec Dell
Wistron Apple
Arima
Clevo
NEC
….

S/he who controls
innovation and design,
controls identity.
THE STARTING POINT

PROCESS SHIFTS

PRODUCTS ARE VERY COMPLEX

SONY was the first Consumer-Electronics company and brand with a fully
integrated Value and Supply Chain from Marketing to Design, from Innovation
to R&D, from Production to Logistics and from Brand Building to inspired
Customer Relationships. SONY was back then the “PERFECT COMPANY”.
SONY
Brand
CUSTOMERS Marketing
SUPPLIERS
RETAILERS Components
Advanced Research
DISTRIBUTORS Sub-Assembly
Design
ASSOCIATIONS Service
R&D
Production
Logistics
1975-85: THE SONY MODEL

APPLE was the first Consumer-High-Tech company with a design focus.
It shared Value and Supply Chain with world-class Partner-ODMs (e.g. SONY,
SAMSUNG, CANON, TOSHIBA ..). APPLE is very Brand and experience
driven and has liberated Brand, Design and Marketing from the “SCM BS”
APPLE ODM
Brand R&D (with APPLE)
CUSTOMERS Marketing Production
RETAILERS Advanced Research Logistics
DISTRIBUTORS Design Components
R&D (with ODM) Sub-Assembly
Service
1984+: APPLE MODEL

DELL was the first High-Tech company without a factory – basically buying
generic products and components in Asia and then offering PCs “to order”.
DELL pioneered the “cost-down” and “efficiency-up” methodology. Software
enabled inter-corporate automation of simple but time-consuming processes.
DELL ODMs
Brand R&D
CUSTOMERS (Design) Production
CORPORATE Marketing Logistics
CONSUMERS Selling Components
Sub-Assembly
Service
1990+: THE DELL MODEL

TARGET STORES & BEST BUY were the first MASS RETAILERS with a
customer-facing strategy by defining what the customers need an want – and
only then define and decide what they buy from a BRAND or OEM and sell.
They use the Supply Chain for “Trading Up” and “Conditioning of the Value”.
OEM ODMs
Brand R&D?
CUSTOMERS
Design Production
RETAILERS R&D? Logistics
Target, Best Buy.. Marketing Components
Amazon, CostCo.. Selling Sub-Assembly
Service
2000+: THE RETAIL MODEL

PRODUCT LIFECYCLE MANAGEMENT
(OLD) INTEGRATED PLM MODEL

FRACTIONED PRODUCT LIFECYCLE MANAGEMENT
(NEW) OUTSOURCED PLM MODEL

A STRATEGIC GIVE-AWAY

As short-term economics
– and not sustainable strategy –
so far are driving PLM in the consumer electronics industry,
we are facing extremely boring products,
dead-end marketing and profits way too small
for all players involved.
2006+: THE CURSE

Due to the internet,
we have totally informed consumers,
who don’t pay more
if there isn’t “extra value” in the product …
…or a very satisfying customer experience.
2006+: THE CURSE

This current business model
is extremely wasteful,
both in regards to economics
and ecology.
2006+: THE CURSE

Polarization
prize-driven “Commodity Products”
and experience-driven “New Luxury Products”
2007+: STATUS QUO

Power Loss
Brands/OEMs who gave
their technical Know-How away,
now they are basically “Brand Retailers”.
2007+: STATUS QUO

Power Gain
Factories/ODMs who gained prowess
in innovation, design and process,
now they hold the key
to competitive advantages.
2007+: STATUS QUO

Outsourcing, Energy and Ecology
Energy and logistic costs
as well as recycle needs increase
- and public awareness requires
more sustainable products.
2007+: STATUS QUO

High-paying Jobs are lost.
As the qualified “specialty worker” jobs are
being moved abroad, the new available jobs
are lower-paying “service worker” jobs.
The Middle-Class is getting impoverished.
2007+: STATUS QUO

Dreamcom is a small Swiss Start-Up which wants to revolutionize the market
of Notebook Computers by putting ergonomics and usability above “cheap”.
In order to achieve this ambitious goal, Dreamcom and frog implemented a
collaborative partnership with Wistron in Taiwan and P.R. China,
DREAMCOM
Brand
CUSTOMERS Marketing
WISTRON
RETAILERS Design
Conceptual Design
DISTRIBUTORS Engineering
Operations
Components
Service
Assembly
Service
2008+: THE DREAMCOM MODEL

ALL NOTEBOOKS ARE EQUAL

ALL NOTEBOOKS ARE EQUALLY WRONG

…WIRKLICHKEIT
Image: Patrick van Hecke

…WIRKLICHER
…WIRKLICHKEIT
Image: Patrick van Hecke
Image: Richard Ellenson

THE COST OF BAD ERGONOMICS
“Notebooks sind fuer staendiges Arbeiten
am zugewiesenen Arbeitsplatz nicht zugelassen.”
“Notebooks are not legal for permanent work
on an assigned job.”
Verordnung über Sicherheit und Gesundheitsschutz
bei der Arbeit an Bildschirmgeräten
(Bildschirmarbeitsverordnung - BildscharbV)
GUIDELINE OF THE EUROPEAN COUNCIL BRUSSELS 90/270
29 May1990

WISTRON, Taipei & Kunshan

WISTRON, Taipei & Kunshan

FINAL PRODUCT

AN INNOVATIVE,
SWISS-CHINESE
NOTEBOOK-COMPUTER

DESIGN SHIFTS

Convergent Design
Customers will value
non-physical experiences over “products”,
and human-driven digital usability
will become a market driver.
2008+: THE NEXT TRENDS

TANGO communicator for children with cerebral palsy
www.blink-twice.com

Social Network Design
By education, people will become
design and innovation literate,
and require products “just the way they want it”.
.
2008+: THE NEXT TRENDS

Re-Use replaces Re-Cycling
Early-Stage product strategies
replace the current waste process.
Products will be modular
and will synchronize component lifecycles.
2008+: THE NEXT TRENDS

LongTerm Phone
> Base frame for modular components
> Display, interface as clips
> Sensors for food and pollutants
> Power crank

Design Re-Cycling
Well-proven “Design Classics”
will be “re-designed” for modern technology.
This re-connects good industrial history
with a more cultural future.
2008+: THE NEXT TRENDS

Hommage to Ettore Sottsas “Valentine PC”
University of Applied Arts, Vienna – ID2
www.creativeDNAaustria.com

Open Source Design
Patents and Intellectual Property rights
will be re-defined.
Sharing of ideas and concepts
leads to a “new industrial rice culture”.
2008+: THE NEXT TRENDS

MONEY BUYS – EMOTION SELLS

SOURCING SHIFTS

H I G H
OUT
SOURCING &
!
T E C H

A FEW DESIGN FOR MANY

PROGRESS IS TOP-DOWN

FROG DESIGN: TRIBON

H I G H
HOME
SOURCING &
!
L O V E

MANY DESIGN FOR A FEW

PROGRESS IS BOTTOM-UP

H I G H
GREEN
SOURCING &
!
L I F E

> Hybrids: TOYOTA PRIUS…
> Fuel Cells: liberation from Big Oil
> Solar & Wind Energy: dropping the “grid”
> Communication: Internet vs. Telco-Monopolies
> Traffic Management: Smart Flow vs. Traffic Jams
> Waste Management: Recycling vs. Waste
BEATING OUT THE MONOPOLIES

LEARN WARE

NATURAL WARE

DATOO WEAR

POWER SHIFTS

THOMAS
JEFFERSON
“All men are created equally free and independent;
they are endowed by their Creator
with certain inalienable rights, that among these are
life, liberty, and the pursuit of happiness.\"
OUR BIRTH RIGHT

> Starting early in Schools (end the waste of talents)
> Honing expert skills and apply holistically (teams)
> The end of “Creative Egotism” (benefits over style)
> Usability and social integration (humanize industry)
CREATIVE EDUCATION

> Sustainability (ecology, culture, economics)
> Humanistic Business (profitability beyond money)
> Science & Technology (focus on balance)
> Industrial Modularity (apply components like food)
CREATIVE EDUCATION

Brand owners and OEMs
are becoming virtual entities
with mostly cultural and emotional assets.
These are defined by their unique and differentiating
innovation and design processes they must
invent by working better with the factories.
2010+: POWER SHIFTS

Market value and success
will be defined by the ability
to anticipate, project and manage
the fulfillment of their customer’s expectations,
needs and dreams.
2010+: POWER SHIFTS

New business strategies
will be defined by non-materialistic fantasies.
Creativity and cultural inspiration
are the core of the new market advantages.
2010+: POWER SHIFTS

High-mix & low volume products
which combine mass-produced high-tech modules
with local creativity and affinity-driven concepts,
will bring high-paying specialty jobs back
2010+: POWER SHIFTS

Values define Identity.
Design has to abandon “dying in beauty”
and will have to create holistic statements
of inspiring interactivity and story telling.
2010+: POWER SHIFTS

“If a story is not about the hearer he will not listen.
And here I make a rule – a great and interesting story
is about everyone or it will not last.”
John Steinbeck (East of Eden)
A NOBEL PRIZE FOR DESIGN

G O O D
FORM
FOLLOWS 4
EMOTION
L I F E
h@frogdesign.com