The Advancement of Vertically Integrated Solutions vs. “end-to-end” Solutions

A topic that fascinates me is the vertically-optimized integration vs. the horizontal (end-to-end) integration approach a company’s strategy may take.  I think this subject is on management radar screens as we watch the escalating battle in smart phones between Apple and Samsung.

Let me first begin by describing vertically-optimized solutions vs. end-to-end solutions.  Vertically optimized solutions examples could be Apple and now Samsung with smart phone development. This is an approach where all the components of a solution are optimized for a specific use case. To succeed in this approach, the business must be focused on a clear use case and often it requires a significant capital investment in order to effectively compete. That’s because many of the components end up being manufactured directly by the vertically-integrated provider. Horizontally-focused solutions, often referred to as “end-to-end,” cobble together solution pieces from various providers in order to offer a “whole solution.” Some, so-called, “end-to-end” solutions rarely provide solutions that expand a market space or drive market innovation.

Apple and Samsung are showing the world that they able to provide a superior user experience when they are able to offer a purpose-designed solution for a specific use case vs. having to leverage a common multi-use case platform. These organizations are fixated on understanding the user experience and ensuring that their “solution experience” is optimized to drive their market position and greater market share. The warehouse and distribution center space has been a strong participant in technology solutions around the vertically-integrated concept for many years with its strong and growing adoption of voice solutions that are purpose-designed for an optimized user experience.

The iPhone’s greatest innovation was changing the rules of a market. Before the iPhone, the standard “smart phone” offered little change to the user experience and minimal value versus the previous phone experience. The iPhone changed how the user interacted with the technology. This change in user interaction also occurred in the voice market with the introduction of vertically-integrated solutions that changed the user experience. 

These voice solutions challenged the status quo, just like the iPhone challenged the status quo of smart phones. The status quo challenge for the voice market was to change the design concept from being a “Swiss Army knife” to one that optimized the solution for the specific user task. Once the design team focused on the user for a specific use case, they were able to create a user experience that changed the way people work. One must question the real value today provided by a screen and keyboard to visually and manually confirm a workflow task completion, when you can instead speak the same information and keep both hands free. One must question the need for a worker to carry a large device for 95 percent of a worker’s tasks that voice and scanning together could accomplish. Have those devices really changed their ergonomic design in 20 years? Luggable is still luggable. Apple and Samsung are two organizations that offered superior user experiences with their own visions that in their own way challenged the need for screens and keyboards, just like voice-centric devices have in the warehouse market.

The next major change that Apple and Samsung undertook was to optimize the component design of their solution. Whereas others in the smart phone space needed to provide similar components for a solution, Apple and Samsung took their design approach to the next level and began managing the manufacturing process to a much greater level of involvement than anyone else. Both organizations have successfully managed the design and manufacturing process throughout to ensure a superior user experience and to ensure that the solution is not compromised by others’ product time schedules and competing manufacturing commitments.

Vocollect has also been a participant in this vertically-integrated thinking, just like Apple and Samsung have been for the smart phone space. There are components in a voice solution that many take for granted, since one can purchase many of the elements from various suppliers.  Let’s look at user headsets, for example. For years, Vocollect sourced headsets from various suppliers to meet its needs, but always struggled with a vendor’s ability to optimize its solution for Vocollect Voice software. Their headsets may have met all the specification needs in general, but they were unwilling or unable to support thought-leading design requirements for the industrial warehouse worker. By being able to design and manufacture its own headsets, Vocollect has been able to harmonize the headset, the voice software and the worker experience seamlessly; just like Apple and Samsung do for smartphones. Optimizing the user experience and a specific use case helps provide design clarity and simplicity. Vocollect’s SoundSense is an example of innovation that’s possible with a vertically integrated solution and virtually impossible with an “end-to-end” solution, without a dedicated design team working together on the headset and voice software. SoundSense seamlessly helps block unwanted facility noises on the worker’s headset to optimize his or her performance.

While end-to-end capabilities will always enable certain market participants to compete by cobbling together the pieces they need for a solution, it prevents them from leading the innovation of the user experience. It will always prevent them from challenging the status quo and being able to provide their customers with solutions to help them maximize the potential applications of their offerings. Apple and Samsung are examples of organizations that focused on customer value and thus have ensured a superior user experience. We can certainly learn from thought-leading organizations willing to challenge the status quo. It’s fun to see how they are able to leverage their vertically oriented market advantage versus competitors that cobble together solutions without significant design influence.

I love quality research, but I hate faulty research conclusions

I love to read about our industry. It’s really an exciting place to be as more people place greater value upon their warehouse logistics. The one thing I hate though is faulty research all in the name of marketing. I see too many organizations who have their marketing or PR team make unfounded claims that they think that by cloaking the claims under the premise of “research” that the industry will believe their findings are credible. 

 So what set me off today, enough to write this … I read some “industry” research today that I consider dead wrong in its conclusion. The headline for the research in question stated “…Research Indicates That Most Online Purchases are Returned Due to Retailer Error”.  They go onto state “The research results prove that the clear majority – 65% - of respondents answered that most often the reason they return items bought online or by phone is because the item received is incorrect”.  Their second finding was that “84% of respondents stated that the return process is extremely or very important to their future intentions to shop with a retailer”. With this being the week of NRF in New York, it’s amazing that any retailer would find any credibility in these “research” assertions.

I started to think about my own life to quickly invalidate what I believe to be wrong research conclusions.  The headline states that returns are “due to retailer error”. Wrong! Most retailers have quite accurate order fulfillment systems in place. Many retailers are now achieving order accuracy over 99%. The top reasons why people return items bought online is because the item does not fit or it is not the color that thought or it’s just not a flattering fashion fit. The consumer returns the item not due to an error by the retailer, but because the item is “not right for them”… but, no error was committed by the retailer in their order fulfillment process which is the main faulty assertion in the research findings.  As an example from my own life, my lovely wife buys shoes from Zappo’s and clothes from J.Crew more than you might think. I’m treading carefully here…  The items she orders show up on time and are correct virtually every time.  Remember, retailers are now achieving order accuracy over 99% and our household can confirm these accuracy levels. But, once the shoes or clothes are tried on…it turns out that they are not what she expected and hoped for… and probably 35% of her orders are returned smoothly without effort.  Over the years, she has become educated to know what designers are not a good for her. She knows for example that with a narrow foot, only certain manufacturers offer “narrow” sizes that properly fit her foot. None of the “incorrect” orders is the fault of the retailer.