Flatline - escaping the hideous smiley face of junk

I remember the hideous smiley faces of the 1970s. For years they haunted boomer dreams, but now we're trapped in the pit of the smile, deluged in cheap junk that's worth less than nothing ...

Gordon's Notes: Riding the dragon - Fallows on China

James Fallows .... The curve is named for the U-shaped arc of the 1970s-era smiley-face icon, and it runs from the beginning to the end of a product’s creation and sale. At the beginning is the company’s brand: HP, Siemens, Dell, Nokia, Apple. Next comes the idea for the product: an iPod, a new computer, a camera phone. After that is high-level industrial design—the conceiving of how the product will look and work. Then the detailed engineering design for how it will be made. Then the necessary components. Then the actual manufacture and assembly. Then the shipping and distribution. Then retail sales. And, finally, service contracts and sales of parts and accessories.

The significance is that China’s activity is in the middle stages—manufacturing, plus some component supply and engineering design—but America’s is at the two ends, and those are where the money is. The smiley curve, which shows the profitability or value added at each stage, starts high for branding and product concept, swoops down for manufacturing, and rises again in the retail and servicing stages. The simple way to put this—that the real money is in brand name, plus retail—may sound obvious, but its implications are illuminating....

So how can one escape the smile and restore "balance to the force"? One approach is fundamentally Darwinian. Strong brands invest in defect analysis and early detection, eliminating suppliers who deliver flawed product. Consumers forget about commodity products and invest in brands. Consumers miraculously develop a memory for what brands fail...

Oops. The memory part is the problem. Do you remember what companies had melamine in their dog food? Do you think you'll remember a year from now? Diethylene glycol in the dime store toothpaste? The DVD player that broke after one month? The wireless home phone that always crackled? The noisy fan, the sloppy wrench, the flimsy toaster ....

What other strategies are there? How else can the curve be balanced between design, brand, manufacturing and retail? How can costs be shifted from retail and brand to invest in better manufacturing and design -- anywhere?

I think we need to look for new options. What if an insurance company were to provide insurance policies guaranteeing devices performed to spec on delivery and for two years post sale? The policy would include a large rider to cover recalls, including a prize to anyone who found a recall qualifying defect. Anything that qualified for coverage would be able to display an appropriate and meaningful "seal of approval". Consumers could choose to get the insurance or not, some might decide the "insurable" measure was enough by itself. Vendors would, of course, have to pay for the "seal".

Perhaps this would produce a kind of "meta-brand", allowing manufacturers to outsource branding and shift investments to design and manufacturing - flattening the hideous smiley.