GoPro’s Execution Karma
After years of rumor and speculation, GoPro (NASDAQ: GPRO), the American manufacturer of the popular action cameras, announced the company’s plans to launch its very first drone, the Karma, at a target price point of $800.
The black and white quadcopter would be able to capture aerial footage using a mounted high-definition GoPro camera sold separately.
The company, which went public in 2014, experienced a lot of growth in its early years due in part to the popularity of viral videos shot with their products which were continually posted on social media.
But in the two years leading to the announcement, the company had struggled with sales, growth
They desperately needed the next big thing and Karma was the answer.
Bundling their high-definition cameras with high-tech drones, another product segment that was hot at the time, would be a powerful expansion of their core platform, and would bring GoPro a step closer to its goal of becoming a media company.
But shortly after Karma’s launch their dreams starting to fall fast and hit the ground – literally. Within just a few days of its launch, angry users started posting videos on the internet of Karma drones crashing for no apparent reason.
As enthusiasts began flying their new devices, they seemed to hit a hard stop after gaining height, as if the power source was suddenly unplugged, leaving the unmanned vehicle on its own up in the air until the owner witnessed a painful free fall as the drone crashed to the ground.
Unfortunately for GoPro, everything was recorded in high-definition video. All of a sudden, the sky was falling for the camera maker’s new product.
Within a week, more and more crash videos were posted everywhere under the hashtag #KarmaCrash and “Karma Crash Compilation” videos went viral on YouTube. As more videos popped up, the company had no other choice but to issue a recall of the drones.
We may never know everything that went wrong in making this product a failure, but poor execution seems to have been one of them.
Rumors about the company’s entry into the drone market began to air in 2014 as the company initiated discussions with the Chinese company and soon-to-be competitor DJI for a private label deal, where DJI would manufacture the drones to be sold under GoPro’s brand.
The deal fell through after GoPro, at the time the fastest-growing tech company, kept pushing to get two thirds of the profits from the joint product.
DJI’s reluctance to the deal was
In the end, why would GoPro make all the money if all they were bringing to the table was a name?
After negotiations with DJI failed, GoPro turned to 3D Robotics (3DR), a popular US drone manufacturer co-founded by former WIRED Magazine editor-in-chief Chris Anderson, to pursue a similar deal.
This also turned out to be a tense relationship since even after the deal was signed GoPro kept hinting at its plans for developing its own drone and becoming a serious competitor for 3DR.
Of course, it didn’t help that GoPro’s CEO Nick Woodman hired a 3DR project manager to lead its internal drone development program.
The GoPro-3DR joint effort produced the Solo drone launched in 2015, starting the timer for GoPro’s in-house drone development effort.
GoPro rushed to develop and ship its own drone on time for the 2016 holidays, with a performance that raises some flags about their execution DNA.
In short, the company seems to have overspent on research and development, set unrealistic deadlines that had to be pushed back and readjusted several times, hired people who lacked the right experience to lead the efforts, and didn’t care too much about optimizing the design of the final product since they needed to hit the shelves in time for holiday shopping season.
The results speak for themselves. The Karma launch ended up with a recall of more than 2,500 units, leaving behind a PR mess for GoPro and putting its management in a very weak position with investors.
Let’s try to break down what could have gone wrong.
The development of autonomous vehicles is a highly technical endeavor, and not many companies have the ability to deliver the products and features that hardcore enthusiasts demand.
For instance, the operating system of these vehicles, called the Flight Controller, relies in most part on open-source software of extremely basic capabilities.
Companies like DJI and 3DR develop their proprietary operating systems by building additional layers of features and functionality on top of that basic core. They invest years, and a lot of money, in the development of these features which get better over time through a lot of trial an error.
This long experience enables these veteran companies to release almost-perfect products out of the box, but in reality it took them years of hard work and fine tuning to get to that point, so it is not clear to outsiders how GoPro planned to enter and take over the market without this learning curve.
GoPro underestimated the complexity of the drone technology and tried to execute a strategy that it didn’t have the tools for.
It set its sights on the final goal, and then went on to mobilize the company’s resources hoping it would get there, but without making sure first that it had what was needed to get the execution right.
What we found through our research is that companies that have demonstrated good execution records relentlessly insist on the realism of their plans. They continually measure their execution gap and ensure that the right people, resources and tools are always in place to achieve their goals.
In fact, measuring the ability to execute before you set your goals is an important part of setting the goals themselves. By no means should this prevent companies from setting aggressive goals, but this is a reality check that needs to be made to ensure that management can execute the company’s mission.
If you don’t assess your execution gap first and adjust your plans accordingly you may end up setting unrealistic goals, sending your troops directly into the hands of failure.
Increasing revenues 20 percent might be an enticing goal for any company, but in understanding what that bump would entail is where the rubber really meets the road.
For a large retailer, for example, such a sales increase could mean fifty additional stores, and that would imply finding enough feasible locations, getting permits, finding suitable labor and adjusting for logistics costs.
If that goal means two new product lines by the end of the year, then management better have those products functional and ready for showtime.
For a B2B company, a significant revenue increase could mean hiring a hundred more salespeople and flexing out its return policy. But more people means more recruiting efforts, salaries, bonus packages and incentives and other processes that will need to be in place to ensure it is hiring the right people.
More flexible return policies, on the other hand, might require re-negotiation with suppliers, optimization of inventory, changes in working capital and so on.
For a drug company, such a goal could entail a painful entry into previously avoided market segments, or the associated costs of lobbying, management of stakeholders, public relations and finding labor among others.
Increasing revenues 20 percent, therefore, cannot be part of your strategy until you can ensure that you can achieve it. Even the best strategy can be no more than a wish list if the company can’t ensure its execution.
But let’s make something clear here: execution is not a strategy. Execution is the ability to make the strategy happen, and as such, it is an intimate part of it, but not the strategy itself.
While the strategy planning process defines what the company wants to achieve, execution takes care of defining how it is going to do it.
These distinctions are important so you better get them right. GoPro’s approach was a case of bad execution, but they did have a good strategy: looking into drones as an expansion of their core business and to get one step closer to becoming a media company.
The opposite can also be true: we can find companies with a great execution of the wrong strategy.
Borders’ great execution of the wrong strategy
Now extinct international books and music retailer Borders Group at one point operated more than 500 stores worldwide where they offered a wide catalog of books and music to customers who enjoyed visiting their stores and spent hours there.
In response to the emergence of digital forms of books and music, and the success of Amazon’s online efforts and Apple’s iTunes, the company doubled down on its efforts to expand into physical books, CDs and DVDs as the world was going digital.
Borders intentionally didn’t embrace the internet wave and instead bet its money on the real-life experience, expanding its physical footprint, refurbishing stores and outsourcing its online sales to Amazon.
The strategy was perfectly executed, but its fundamentals turned out to be wrong. By the time Borders realized that the internet was the right wave and they had missed it, it was too late: The company was so loaded with debt from its physical expansions that even if it wanted to make a move and embrace digital (like Barnes & Noble did) it couldn’t afford to.
All it could do by then was watch things come to an end, and hope it happened fast.
If your strategy is right, you had better get the execution right as well, or you may not make it out alive. But if your strategy is wrong and based on an “unrealistic reality”, it will take you nowhere, as happened with Borders.
Now, is it possible to get both the strategy and the execution right, but still fail? Well, let’s look at a case that suggests so.
How a good strategy and great execution can fail
When Apple launched its HomePod smart speaker, in response to the success of Amazon Echo and Google Home, it made a lot of sense strategically.
In the end, these devices are hardware extensions to the companies’ digital assistants (Apple’s Siri, Amazon’s Alexa and Google’s Google Assistant) which give them access to a bigger share of their users’ lives, and wallets.
By all accounts the HomePod is a handsome piece of hardware, with great sound that spills out from seven internal tweeters and a high-excursion woofer that picks up the lower frequencies, all powered by Apple’s own powerful A8 chip.
It is also a slick way to anchor users deeper into Apple’s ecosystem of hardware and software.
There’s no doubt that the HomePod has great strategic value for Apple, and as a piece of hardware it was perfectly executed by Apple’s design and development teams. But the device was not the big success that the company expected. The problem: it was created around a poor performing platform, Siri.
At launch, the Siri-powered HomePod couldn’t do even the most basic functions that similar solutions did with ease such as looking up recipes, making phone calls or playing something on TV.
Once a pioneer in the space, Apple’s voice assistant has grown old quickly and has been left in the dust by Alexa and Google Assistant, which were developed on more advanced speech recognition platforms.
In the HomePod, those deficiencies are brought front and center since the device relies entirely on the voice assistant for pretty much everything.
One of the benefits of being a late mover into a space is that you get to learn from others’ mistakes, which gives you the opportunity to fix problems before your product is launched.
Apple obviously didn’t take advantage of that with the HomePod and launched a product that performed poorly by the industry current standards, leading to bad reviews and dissatisfaction from customers who paid twice as much for a device that does half of what others do.
But one of the problems with being an early entrant to a space, like Apple was with Siri, is that you may end up making a bet on the wrong platform.
With Siri, the problem seems to be that its core technology doesn’t work well with some of the more recent developments in the fields of Natural Language Processing (NLP) and Artificial Intelligence, and its development teams had to continually find ways to force new features into its core and patch things up to make Siri functional.
When you face a structural misalignment, even if your strategy and execution are right, you will “systematically” fail at both.
Because you can’t keep up with the pace of others that have been built differently. You are pretty much handicapped in the race.
When you are faced with those problems, what you need to do is to make the hard decisions (for example, not to launch the HomePod) and cut the problem off at the root (for example, remake Siri from scratch).
Case in hand, a similar problem happened to Apple with its Maps application and it decided to redo the whole thing from scratch.
Good execution is in the end the ability to systematically implement your strategy effectively, but if you have core problems you will systematically get it wrong.
The worst case, however, is not having a strategy at all, because if you don’t know where you’re going, you’ll probably end up somewhere else.
The worst case: Having no strategy at all
In the late 1960s, Paramount Studios obtained the Star Trek franchise through the acquisition of Lucille Ball’s production company Desilu, and was desperately trying to make some money from it.
Following NBC’s cancellation of the show after only three seasons, Paramount licensed its syndication rights (the rights to broadcast the show through other networks) which revamped public interest in the show.
With a new and growing fan base, demand for the show merchandise exploded, putting Paramount in a good position to squeeze the franchise. But since all they wanted was to make a few bucks with it, Paramount decided to license the sales of show-related merchandise to pretty much anyone who wanted to take a shot at it.
That decision flooded the toy stores’ shelves with products like the Star Trek Freezicles, where kids could make Mr. Spock-shaped popsicles, and with others that didn’t have anything to do with the show, like the Star Trek parachuting characters (Star Trek’s characters never parachuted in the show).
What happened was that with the success of the franchise and the low barriers to licensing its products, any toy maker could convert an existing toy line into Star Trek merchandise by just slapping the logo on it, making millions along the way, but Paramount didn’t seem to care.
One of the companies that made a fortune through Star Trek merchandise was toy manufacturer Mego Corporation, who bought a license from Paramount for $5,000 and made over $50 million in sales with it.
Mego was famous for taking “liberties” in the design of franchise-related products so it could reuse its existing molds from other action figures.
A good example of Mego’s “creative” work was the action figure of the Gorn, a green lizard character that appears in one of the initial Star Trek episodes. To make the Gorn action figure, Mego used the head of Marvel’s Lizard (a figure it also made), the body of General Ursus of Planet of the Apes, and an outfit of the Klingons, a fictitious species created by the Star Trek franchise.
“We took some poetic license,” is how Martin Abrams, Mego’s president answered angry fans who complained about the merchandise.
Paramount never seemed to have a strategy for Star Trek, and that took it to places it didn’t plan to be, leaving fans outraged and enabling smaller companies to profit unevenly off the franchise.
When reflecting on the millions he was able to make from the Star Trek franchise with just a $5,000 investment, Abrams says “that was a trip”.
Wu, Sun. Strategy for Executives, this book can now be downloaded for free here.
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