INTERVIEW: Design after the bubble Kevin Fong

Kevin Fong, the Managing Director of the Mayfield Fund, a venture capital firm, orients us to the roles design plays in creating economic value for entrepreneurs.

For many years, design has been a part of Silicon Valley style technology ventures. Even after the Internet bubble popped, longtime Mayfield partner and Managing Director Kevin Fong explains, design has remained a key part of the business solution.

Brandon Schauer: Design received a good bit of new attention during the bubble years. Do you see there being a greater or lesser need now for design in business?

Kevin Fong: I agree that the bubble years clearly gave design more publicity. Please remember that my perspective is very much from that of high-tech innovation and Silicon Valley style companies. But from my perspective, design has always been something that's been important, starting in the early ‘80s with Apple computer. In fact, I think that if there were a lifetime achievement award for bringing product design into my world, its to Steve Jobs for his work with the Macintosh, with the Lisa before that, with the Newton, and with his use of Frog Design. Another influence bringing design into my world is David Kelley's growing presence at Stanford, his product design program, all of his graduate students, and all of the resulting design shops that sprung out of the Palo Alto area. However, I think my world was always part of design. Even in the early ‘80s when I was an entrepreneur working at my company in marketing, we paid a lot of attention to product design even though we were selling a piece of communications infrastructure hardware.

Since these early days the need for design has been increasing over time. The bubble has certainly made it more visible and caused it to become trendier, if I can use that word, because companies are looking for every possible way to differentiate themselves — whether it's how they design their website, or how they deliver products, or how they develop their corporate image.

So is design needed now more than even after the bubble years? The answer is yes, because we're still in a highly competitive global environment and therefore design is more present. As evidence I'll point to the article in Business Week from last November about Samsung and their product design team. I think Samsung's rise to prominence in the cell phone industry has been because of their attention to product design, human factors, and usability.

Brandon Schauer: What do you see as the value that design's bringing today to new ventures? In the past, design may have been used more for differentiation. Is it playing that same role today, or is it expanding?

Kevin Fong: I think there's really two points here. First, design is absolutely about differentiation. Not only about a company being noticed in terms of overall style and appearance, but about the company communicating what it stands for through its design. Secondly, design is about usability. But even usability can be thought of as being a part of a company's differentiation.

One very well known example is the Apple iPod and its user interface, styling, and how the product design is carried into the base of its ad campaign. Having nothing in the ads except the white wires of the headphone signals Apple's amazing level of attention to design.

Another example is a company that Mayfield invests in called Aliph. This company provides mobile phone headsets with special, high-quality noise canceling on both the microphone and the speaker. Aliph hired a very famous designer in order turn the headset from simply a functional piece to a headset that provides an image of the company. The headset is actually styled like a fashion accessory. I think cell phones will move in this direction as well, if they're not already with the Motorola RAZR. Cell phones are fashion statements too. Just look at Asia where people wear cell phones around their neck on a chain. I think design plays a big part in today's world.

Brandon Schauer: So to get very tactical, please explain how economic value is created from the differentiation, the branding, and the user experience that design brings to a business problem?

Kevin Fong: Design is creating the economic value by bringing attention to the company's product and helping to define the consumer’s perception of the company as being innovative, cool, or trustworthy. This is even evident on the packaging of a product: its packaging, its quick start guide (or the fact that it doesn't need one), and how the product works right out of the box. These things tell me that the company cares about the out-of-the-box experience. It tells me someone's thinking more deeply than just about getting a product into my hands. Someone cares about the user experience; from the time I acquire it to the time I put it to use, for retail products as well as business products.

Brandon Schauer: So as you select partners to invest in, how have you seen design incorporated within their entrepreneurial ideas?

Kevin Fong: Well I think Aliph, the headset is one example of it. Their product is called Jawbone (you can see it at http://www.aliph.com). I totally think that Aliph is all about incorporating design.

The more and more Mayfield looks to mass-market products and we look to the consumer, the more the incorporation of design becomes absolutely important. I looked at a company to potentially invest in yesterday, and they are so focused on the out-of-box experience and how the packaging communicates both what the company does and the features they put in the product. The company wants the packaging to be as simple and straightforward as possible when communicating what you use it for, how you use it, and how to get it working. They made a big emphasis on that. But if they didn't have that, I wouldn't even be considering them for an investment.

Brandon Schauer: In what sectors do you see big changes taking place, and in which of these sectors can design and business start playing an integrated role?

Kevin Fong: From my viewpoint as a technology investor, right now the consumer sector is almost more risk-seeking and interested in the acquisition and use of new technology than what traditionally has been driven by technology businesses. In the technology business the focus was originally on engineers, then it moved to enterprise customers, and then it moved on to service providers, meaning companies like telcos. Consumers had not been the major focus for many startup companies, but with the advent of the Internet and mass marketing companies like Google and Yahoo, the venture business is moving into looking at companies that address the larger consumer. The integration of business and design make all the difference because a company's product, how it works, and its out-of-the-box experience are all about advertising. They form the customers' impressions and determine whether or not they'll tell other people about the product.

Brandon Schauer: One of the themes we've been reading about in this newsletter is that design not only integrates with technology to create business solutions, but design can also fit business opportunities within new social trends. Have you seen this playing out with the entrepreneurial businesses you've been partnering with?

Kevin Fong: Absolutely. Take for example the Internet. I've felt even in 1993 when we first started looking at it, that the Internet is not a technology. It really has more social impact than it does technological impact. This wonderful communications medium is causing people to live in new ways. There's this phenomena called social networking — actually there's lots of terms being bandied about and there's not necessarily one that does justice to what's happening — but social networking is about building community-based services by using the Internet to enable highly fragmented and diverse groups to come together in a way that wasn't possible before. New businesses are creating those environments as the first step, but then later on I'm sure there will be companies that cater to those small markets. It's just incredible. eBay is a great example of social networking. Another example is a company we have an investment in called Tribe.

Consider blogs, which are essentially a new form of news delivery. Maybe the news is highly editorialized or highly opinionated, but blogs are a new way for information and opinion exchange that's taking off. Then there's also the technology of wikis that have been added to the Web. Wiki technology has enabled a grassroots-built encyclopedia called Wikipedia that has grown from the contributions of authors all over the world. It's just incredible.

So there's these new ways of collaboration and information exchange. And one of the things we're asking about this is, “What is it doing to traditional news media? How will these changes affect the traditional strong media companies when there's grassroots reporting?” This is similar to when people in the early ‘90s talked about the affect of the camcorder on the television news business. Today the production costs for sound, video, and newsgathering are so low that everyone can be a contributor. Video is getting to the point where it's going to follow the trends of music. In the past you used to think that music took a long time to download, but now everyone downloads music online. You have a lot of illegal music downloading, but you also have a lot of new things like podcasting happening. Video is going to follow this same trend. We've just barely scratched the surface of new models of how people do things.

Brandon Schauer: The conference is coming up soon, and we're very excited that you'll be coming and speaking. What value does the conference hold for you?

Kevin Fong: I'm extremely sensitive to the fact that I live in a very parochial environment. I see things from small companies with a technology orientation, so conferences like this really expand my mind and bring in other ideas that I can take back and apply to my own business.

A lot of people ask me about what's the hot new area to invest in. In the past it was the Internet, personal computers, microprocessors, or whatever the trend was. Today we're living in a point and time where there is no hot new thing. There is no one earth-shattering theme that is just going to carry everything forward in a big wave. Instead the interesting things today are happening at the intersections of different worlds, where two worlds have never collaborated before. Take as a historical example the intersection of the Internet and the music industry, iPod and iTunes.

These intersections of where two worlds meet and collide are very interesting to me. One of the things I'm investigating is the advertising world because of the fragmentation of the audience space, because of these new communications mediums, and because video can now (or in the near future) be delivered over very cheap infrastructure. These forces are going to change advertising and create opportunities that we've never really looked at before.

So I think that the more I learn about other worlds and learn about what's happening, the more it opens my eyes and causes me to think about what new opportunities there are.

An entrepreneur, successful investor and philanthropist, Kevin Fong also provides leadership to the Mayfield partnership. Kevin joined Mayfield in 1988 and became a Managing Director in 1999, He was an early investor in many of technology's leading networking and communications companies including Legato, Latitude and Redback.

Kevin currently sits on the boards of 3PARdata, Cemaphore Systems, Cooligy, Fultec, Hammerhead Systems, Mendocino Software, OnStor, Tasman Networks, and Velocity 11.