The legendary reggae band releases the 2012 version of the Barack Obama Song >>
The 2008 video version is here >>
The legendary reggae band releases the 2012 version of the Barack Obama Song >>
The 2008 video version is here >>
I know what some of you are thinking - "Well, did America have a soul to begin with?" I happen to think it did. For me the soul of America is "We, the people..."
Furthermore, I'm quite sure that people, as defined by our founders, did not mean corporations. (See what Charles Handy has to say >>)
But to get back to the topic of inclusivity, I'd like to make a shameless plug for our new book, co-authored with University of Michigan's Professor Michael Gordon, called Inclusivity: Will America Find Its Soul Again?
BUY now >>
I go to my local bookstore, drink a coffee and
browse the shelves. When I get home, I rush to the computer and buy the books I
fancied - online! If it's a business
book, I download a copy on my digital reader, and if it's a literary
work, I buy the physical book at a discounted price.
As a way to assuage my guilt, I've thought of some ways to help my local bookstore survive - because, like so many of us, I love the physical bookstore experience - nothing beats the Zen practice of disinterested info-grazing - and I'd like to continue to enjoy it.
However, I notice at my local Barnes & Noble that
they're busy selling Nook ereaders in every cranny. [Do they really think they
can compete with the iPad or even Kindle?] Is this really going to save the
physical store? Nope.
Most likely, it's an idea dreamt up by the financial types at headquarters who've been "missioned" to tap into the digital value-stream. After all, why should B&N just stand there and watch their profits drift lazily down a South American river? It's important to note that despite B&N saying the Nook is a "success," they still rely on brick and mortar stores (retail and college bookstores) for over 75% of their revenue and the competition is going to become even more intense with dozens of new tablet and reader devices being introduced this year.
And how does B&N take a trip down the Nile? Apparently, the secret sauce is that they allow Nook owners to take their devices into any B&N physical store and read any e-book for free. Nooktalk tells us that in reality, it's not exactly a seamless reading experience. And now that Amazon allows Kindle owners to "lend" books to each other, the Nook may find itself in the, ahem, corner.
So what can your local bookstore do to take advantage of its strengths?
Here are three suggestions to shake up the physical bookstore business model:
Daily Book Rental
Why can't the bookstore become a pay-as-you-read library? As a kid growing up in India, I remember borrowing books (alright, some these were Asterix and Tintin comics) from the bookstore for a daily fee. This business model shows some reverse innovation promise. Can you imagine "tiered pricing" linked to free coffee rewards? Sign up for the all-you-can-read buffet. And of course, we get to pay fines if we return our books late.
Distribute Local Books
What if a physical copy of your book gets published in-store and sold in your town's bookstore? Can you visualize a "Newbie Authors" section where one copy of your book gets to sit on the shelf for a week? If it doesn't sell in a week, you can either pay for shelf space or you can buy your books back. The minute you or your mother buys your Great American Novel, a new one is printed and placed on the shelf. The top 5 bestsellers in each town get national distribution and placement for a week. Book fest!
How does a bookstore do this? If you're Barnes and Noble, you could hire retired teachers to do this; pick people who are enthusiastic and spread their love of the subject. If you're a small bookstore, you can still find enthusiastic community leaders to do the same - in fact you can specialize, and create a niche around the main clientele in your store.
Does all of this sound a bit off the wall? Good, then it's worth a try. The Nook, I'm sorry to say, isn't going to save Barnes & Noble.
P.S. Over at HBR, Sarah Green gives us another suggestion: Amazon should partner with Independent Bookstores!
Michael Gordon's book, Design Your Life, Change the World: Your Path as a Social Entrepreneur [A GUIDE for CHANGEMAKERS] is for changemakers - the people and organizations that want to make a difference in the world.
The book tries to answer two questions, says Professor Gordon:
1) How can organizations best address important societal problems such as poverty, inadequate health care, sub-par education, and an unhealthy planet?
2) What's the best advice for students who want to address these issues and still live lives of relative comfort?
The reason I'm helping the professor is because now, more than ever, we need the brightest students to tackle the world's biggest problems. And the oil-coal-nuclear lobby isn't making things any easier...
Are you a changemaker? Go find out >>
P.S. - you can download the PDF version here >>
I first met Bob Freling at a board meeting of the Solar Electric Light Fund (SELF) in San Francisco several years ago. At the time, I felt that here was an NGO doing innovative things but not getting enough visibility for their work. They were solar way before solar was cool.
What struck me is how informal and close the board members were. One of the board members - Larry Hagman (good ol’ J.R. Ewing) - did a brilliant set of solar commercials which I think says a lot about his character and wanting to make the world a better place (quite the opposite of his TV character!). But I digress.
The story here is that SELF pioneered the use of solar power to fight “energy poverty” across a spectrum of applications with their “solar integrated development model” - from clean water, to drip irrigation to improve food security, to electricity for health clinics, schools, and micro-enterprise.
In his blog post about the $300 House Energy Challenge, Bob explains:
“It’s simple really. First, solar energy powers pumps and filters for clean water. This also enables drip irrigation for critical crops. Once people have those necessities, the solar energy is used to power health care facilities which can power equipment and refrigerate vaccines, for example. This increasingly healthy population can then open schools which are powered by solar to provide computer and Internet-based learning. Finally, these well-fed, well-cared for, well-educated villagers can begin community and entrepreneurial activities to grow their economy.”
Bob’s optimism is tempered with reality. The Millennium Development Goals won’t be achieved without energy access, he explains in another blog post. In case you forgot what the MDGs are (as I often do) they’re listed as:
1) eradicating extreme poverty and hunger;
2) achieving universal primary education;
3) promoting gender equality and empowering women;
4) reducing child mortality;
5) improving maternal health;
6) combating HIV/AIDS, malaria, and other diseases;
7) ensuring environmental sustainability; and
8) building a global partnership for development.
Note that they are interrelated, ecosystemic problems - and that from Bob’s perspective, energy is the key factor which makes all of them feasible.
With the $300 House project, my eyes have been opened to the fact that the approaches for dealing with the poor are often not very constructive, and sometimes end up doing more damage than good. That’s what $300 House adviser Stuart L. Hart is talking about when he says we need to create smaller problems. It is also a concern of our critics on the $300 House. When I spoke to Matias Echanove recently, he was concerned that mass produced housing could in fact disrupt the local economy - the small businesses that are based in informal slums around the country. I hear him.
Our $300 House project is exploring ways to integrate services and jobs into the ecosystem as well, and we’re reaching out to talk to the leaders in the communities that are interested in this approach. In India, we’ve just completed a survey - with the help of THL - that covers 15 villages in three of the poorest states in India - Uttar Pradesh, Bihar, and Jharkhand. I’ll go into more detail in a later post.
For me the question is quite simple - we see an explosion of interest in developing integrated townships for the middle class in India, but why is there nothing comparable for the poor? To borrow a phrase from the US, why can’t we build “master-planned communities” for the poor?
Is it too much to ask that governments, NGOs and development institutions, and businesses work together with the communities involved to build integrated solutions?
Unfortunately, there are far too few examples of collaborative development. This is something we all need to look at urgently. There is also a problem of ownership. The development community, NGOs, and most governments think they “own” the problem. Unfortunately, without a business mindset to make solutions scale, their is so little real progress.
The poor remain poor.
And that’s why the work Paul Polak is doing is so important. He’s looking at making small changes at the bottom of the pyramid; small changes that make a big difference in the earnings of the poor. This is also the approach advocated by Esther Duflo and Abhijit Bannerjee in Poor Economics.
At a much larger scale, we see an example in the Gates Foundation’s approach - which is all about examining the ecosystems of poverty. A common criticism of the Gates Foundation goes along these lines: “How can people like Gates, living in a different universe, help people at the bottom of the pyramid?” This is a false and damaging argument, but answered quite well by Sam Dryden:
“Some people may ask how my team and I—working at the world’s largest foundation located in a prosperous corner of a rich nation—can relate to a subsistence farming family in Ethiopia or Bangladesh. This is a very reasonable question to ask. The farmer has a direct connection to the land and we are considerably removed, both by distance and culture. We begin by realizing these differences and humbly listening to farmers and their families, learning and respecting their cultures, ways of living, and knowledge of place and home. The solutions we seek are those appropriate and welcomed in this context, not those imposed by distant values or interests.”
And finally, perhaps there is an alternative to the giant top-down programs, and incremental bottom-up “Let the Poor Do It Themselves” approaches we’ve encountered.
With the $300 House, we’re thinking micro-development - is it possible to build integrated micro-solutions at the village level? And in cities, at the neighborhood level?
When I first started working on classifying online ecosystems, I had no idea that my thinking there would influence my thoughts on the $300 House. But now it seems like the systems approach to understanding wicked problems is pretty much the only way to go. None of this is new, of course, but I'm still impressed at the power of ecosystem thinking.
Here's how Nobel prize laureate Gunnar Myrdal was thinking about the problems of race and poverty:
The "vicious circle" has not yet made its way into our political thinking though, if we judge the policy makers of today's Congress. Heck, they can't even bring themselves to accept the effects of global warming - in no small part thanks to our lobbyist friends.
The idea of poverty as the outcome of a dysfunctional ecosystem is explained here as well:
Note that this applies to poverty in the US as well, not just the emerging world.
So, part of tackling the issue of affordable housing for the poor is to try to understand the interconnected nature of these problems. I tried to draw causal arrows between the various problems, but gave up. In essence, we have a problem of insecurity, in which all of these factors must be addressed simultaneously if we are to change the vicious cycle of poverty, disease, and suffering. Here's what I ended up with:
The poor live in an insecure, unbalanced universe.
I'm calling it the "ecosystems of poverty."
Next we'll look at the idea of integrated development (another old idea) which fell out of favor, but must be re-evaluated in today's light if we are serious about poverty alleviation.
Sometimes not knowing what you’re doing can help you do it.
Here I make a fool of myself at the Guardian’s Activate2011 conference in London:
The final Harvard Business Review post in the series, and hopefully the start of some real change at the bottom of the pyramid.
Our goal is to go social for social business. Can social co-creation help the poor?
Thanks also to Scott Berinato at HBR and of course - VG, my partner in crime.
This chart by the folks at the Eurasia Group, got me thinking. Something just doesn’t make sense:
Then it hit me. This is a rather conventional way to screen for global opportunities. If we looked at other screens like “innovation potential,” “middle class expansion rate,” “Gini coefficient shrinkage,” or “corruption index,”you’d see a very different picture.
Seth Godin posts a very insightful blog entry on the HBR site. He's talking about the challenges of marketing at the bottom of the pyramid:
When someone in poverty buys a device that improves productivity, the
device pays for itself (if it didn't, they wouldn't buy it.) So a drip
irrigation system, for example, may pay off by creating two or three
harvests a year instead of one.
Read all about it >>
The Solar Electric Light Fund's Bob Freling has posted an entry in Harvard Business Review about his Solar Integrated Development (SID) Maturity Model and how it fits into our concept of the $300 House.
Here's Bob waxing eloquent:
Together with potable water, nutritious food, accessible health care, educational opportunity, and economic empowerment, the $300 House completes this virtuous ecosystem in which individual households and their communities can march hand in hand towards a bright and sustainable future.
Read the whole post The $300 House: The Energy Challenge >>
The Gap screws up with their logo redesign. A giant failure of imagination in the boardroom.
But Umair Haque asks the right questions:
We all need to wake up. The Chamber of Commerce approach to design isn't going to work anymore.
Cracking the challenge of slums is the world's biggest problem of the next quarter-century, because the ecology of slums and the ecology of cities are linked. We cannot have a healthy global economy without healthy cities, and we cannot have healthy cities without tackling slums.
Join us >>
We're building a "creationspace" (JSB's word) for the $300 House-for-the-Poor at 300house.com >>
Please sign up, and tell your friends!
Ever since the Haiti earthquake, I’ve been thinking about why we don’t have a quick-build house made of sustainable materials at a price point that the poor can afford (with micro-credit if needed).
The $300 House-for-the-Poor is an extension of the concept of “reverse innovation” (inspired by my client and friend VG) in which innovations developed in poor countries are then brought back for use in developed countries and other parts of the world. Housing impacts health, energy, education, and security.
What if we could build sustainably designed houses for the world’s poor at an affordable cost? What if these same designs could provide relief to refugees and victims of natural disasters? The we I’m referring to is a collaborative of companies, governments, and NGOs.
This type of a structure will be engineered in the same way the TATA Nano was engineered - without the traditional assumptions.
Once built, the $300 house should be used across the globe - from Haiti, to Africa, India, and yes, even in this country, to help the homeless.
So what are we waiting for? It’s time to get busy designing the $300 House!
The political intentions of our GOP friends would leave the US with a hollowed-out economy.
Here is an example of how Obama’s unpopular bail-out for the auto-industry led to the creation of a new and critical cleantech industry - electric batteries - in this country. What say you, FOX News?
In the past year, the lines have crossed in North Carolina. Electricity from new solar installations is now cheaper than electricity from proposed new nuclear plants.
Take away government nuclear subsidies, and the case is closed!
Read the report >>
Go J.R.! Note he mentions my client - the Solar Electric Light Fund. Stay tuned for more news about them...
I like the SolarWorld ads Hagman does quite a bit. Here he's talking to Sue Ellen (who seems to be blaming him for BP's mess in the Gulf):
Shine, baby, shine! Well said, Larry Hagman!
The thing about Hagman is he put his money where his mouth is - years ago - by converting his estate to solar, before solar was cool.
Vijay Govindarajan on the HBR blog: The U.S. Must Grab the Lead on Green. High time our business leaders started leading, as VG encourages them to do.
According to VG:
At the company level, many energy businesses are unwilling to cannibalize their existing services and their current investments. At the national level, the same dynamics are in play. Aided and abetted by the U.S. Chamber of Commerce, the traditional energy lobby (oil, coal) is using its political and economic muscle to stifle innovation in alternative energy and clean technologies.
Don’t get me started on the losers at the US Chamber of Commerce!
...the idea was first conceived by an Indian physics professor at the University of Maryland, who, in his travels around India, realized how widespread bribery was and wanted to do something about it. He came up with the idea of printing zero-denomination notes and handing them out to officials whenever he was asked for kickbacks as a way to show his resistance. Anand took this idea further: to print them en masse, widely publicize them, and give them out to the Indian people. He thought these notes would be a way to get people to show their disapproval of public service delivery dependent on bribes. The notes did just that. The first batch of 25,000 notes were met with such demand that 5th Pillar has ended up distributing one million zero-rupee notes to date since it began this initiative. Along the way, the organization has collected many stories from people using them to successfully resist engaging in bribery.
I like it. Now let's send some "zero dollars" to the Famous Five justices Supreme Court, the Blue-Dog Democrats, and the entire Republican party.
My client Gaurav Bhalla has just published an article in the January-February Harvard Business Review titled - Rethinking Marketing.
Along with his co-authors - Roland Rust and Christine Moormon - Bhalla insists that companies must shift their mindsets from a product-centered focus to building long-term relationships with customers.
This can only be done if companies reinvent the marketing function.
"The traditional marketing department must be reconfigured as a customer department that puts building customer relationships ahead of pushing specific products. To this end, product managers and customer-focused departments report to a Chief Customer Officer instead of a CMO, and support the strategies of customer or segment managers."
You can sign up for Bhalla's Customer-Driven Innovation Newsletter and download "Rethinking Marketing" here >>
"...angry employees are more likely to commit further resources to a failing project or choice. By contrast, fear makes people second-guess themselves and often abandon support for efforts that have gone even slightly off the tracks."
OK. What happens when you have other emotions like sadness, joy, or just plain happiness? Do you make stupid decisions when you delude yourself? Or does a cynic make better decisions?
This is something that keeps happening with IBM's FTP server.
I was just trying to download this report: Seizing the advantage. When and how to innovate your business model"...
I have to say, this happens all the time on the site.
What's going on IBM? This is not exactly the best way to win friends and influence prospects.
P.S. - will let you know if I ever get to the document!
UPDATE: Not sure if this is the same document, but I found it on the UK site.
UPDATE #2: Look what I found at Booz >>
UPDATE #3: And this from EY >>
How do you encourage curiosity across a global organization?
"Many consultants out there would rather just give answers and are even afraid to ask questions. We deliberately hire people who aren't like that, even early in their careers, and senior consultants coach them on how to be inquisitive. Sometimes that means asking a client's managers very difficult questions, really pushing them hard to reveal or do things they're not comfortable with--getting a CEO to explain lagging sales, for example, or to acknowledge why a competitor's pulling ahead. Other times that means encouraging constructive dissent--deliberately engaging with people who disagree with you and being willing to probe them on their point of view. That can be tricky, but persistent questioning usually produces the best solutions."
- Orit Gadiesh in an interview HBR, Sept. 2009
Remember when she debuted? Too bad her purple reign is over...
If you haven’t heard about free2work.org, you will. This is part of a growing explosion of consumer-education organizations dedicated to exposing “worst practices” among multinationals.
The hope is that if consumers know what is going on, they will vote with their purchasing power and seek out the companies that are doing good. I’m all for it. Who wouldn’t be? Oh, I forgot about the US Chamber of Commerce…
On the academic side of things, we see the same story emerging:
Rosabeth Moss Kanter’s latest book, SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good argues that “the model of American capitalism that worked so well to raise the fortunes of millions of people last century appears to have hit a wall. What’s good for General Motors may no longer be good for the country. In its place must arise a new model of the company, one that serves society as well as rewarding shareholders and employees.”
Maybe Doug Smith was just a little ahead of the times when he wrote On Value and Values: Thinking Differently About We in an Age of Me - which to me is still the best book in this space.
Townsend makes a good point:
So why can't a company like GE follow down this path with "open reverse innovation" - inviting small companies in India and China to submit their products, services and ideas to be evaluated by GE for global distribution. Of course, the open model would require an environment of trust - but what better way to create goodwill in new markets than to be seen as a development partner in the China, India, and resource-starved Africa? A.G. Lafley sits on GE's board; surely he could help them get started.Townsend also proposes the formation of innovation collaboratives funded by companies like GE to create a pipeline of new products for GE.
The common assumption is that the traditional IT vendors will be disrupted by cloud computing offerings from Amazon and Google. The truth is, Amazon and Google may eventually impact this market, but they will not be the first to disrupt traditional IT service providers.Already we see hosting providers like Rackspace and SoftLayer provide their own suite of differentiated cloud offerings.My thinking is that the entire cloud story is a paradigm shift for IT. See this article I just co-authored: Considerations for Migrating to the Cloud: How Cloud Computing is Changing the Enterprise »
Edo Segal has an interesting guest blog at TechCrunch describing the “Future of Media.”
He points to Apple’s App Store as an example of what the rest need to learn:
The only way to block the incredible ease of pirating any content a media company can generate is to couple said experiences with extensions that live in the cloud and enhance that experience for consumers. Not just for some fancy DRM but for real value creation. They must begin to create a product that is not simply a static digital file that can be easily copied and distributed, but rather view media as a dynamic “application” with extensions via the web. This howl is the future evolution of the media industry. It has arrived from a company that is delivering the goods. Apple has made it painless for consumers to spend money and get the media they want where they want it, proving that consumers are happy to pay for media if delivered in ways that make it easy and blissful to consume.
He also states, rather matter of factly, that “he premise of extending the media experience to the cloud is a core necessity for the survival and growth of the media industry.” I agree. The media industry needs to “sell access and experiences, not media files.”
So how does an artist or a media company build these experiences?
I’ve been doing some thinking along these lines for a band I’ve followed for many years - Steel Pulse. What’s interesting is that while the band has a huge, global, cross-generational following built over the past 35 years - the media companies that were responsible for promoting them have done absolutely nothing to tap into this enthusiasm. Not one thing.
The same goes for most of my business thought-leader clients as well. The publishing houses do nothing to create a conversation with the passionate fans.
Engagement is the key. How does a musician or an author engage with their audience, their fan-base? It starts with the quality of the conversation. And let me tell you, it’s far easier for an individual thought-leader or musician to do this than companies, largely because companies are too formal, too corporate, and don’t usually communicate with a human voice.
What’s needed is a way to go direct.
Let the celebrity or thought-leader engage with their fans directly to build an attention platform, unique to the celebrity. The company that empowers this attention platform, and builds new services for the fans, will build the next media empire with the “lock-in” that comes with authentic engagement.
Of course, none of this works without authenticity. The celebrity must remain true to themselves. In Steel Pulse’s case, this means they need to stick to their core brand dimensions. So each successive album, each song, each product, each statement, builds on the Steel Pulse Experience.
They could even track the core messages of a successful album - in this case “True Democracy” - and extend their meaning in new songs and releases:
Phase One: PUSHSo what does the celebrity do today? In Britney Spears’ case, she’s tweeting her launch of a new song. To me that’s not much of anything. Yes, she’s reaching out through social media -Twitter, Facebook, and MySpace - but these are all still one way marketing pitches - push media.
Phase Two: PULL
What happens if the fans come to you - with their suggestions, requests, and insights? What happens when they want to participate? Is it possible to co-create products and services based on insights from yoru fans? Of course it is.
Start the conversation. Go 80/20: focus on the 20% of fans that will get you 80% of your profits. Start talking (and listening) to your biggest supporters.
Engage: physically meet the 20%. Create special events for them. In soccer for example, fans pay $30-50 dollars just to watch Cristiano Ronaldo practice. What’s wrong with doing a 30 minute sound check for your fans? Invite them to the sound check - and have exclusive “sound check products” available only for these fans - available at the event, and online as well. You could even have a question and answer session that they get to download later that evening.
Then of course you sell the live version of the show - for a “limited time only.” Vary the show slightly with the song set, so every night is a different.
Let your fans download the raw tracks and make their own mixes. Have a contest for the best mixes. Sell the mixes to other fans. Use them in your album.
And when you create a new album, it’s version-time. Reggae music has a long history of selling versions. What’s sad is they’ve stopped this traditional practice when really they need to be exploiting it. (See Hal Varian on versioning.) So every song should have the following versions: album version, extended version, dub version, accapella version, acoustic version, dance version, Nyabinghi version, etc. etc.
Talk to the fans about the songs through webcasts, band-calls. Let then know where and what’s next. Let them vote on what you should do next.
For legacy songs, make sure you sell versions-in-time. The 1983 version of Chant a Psalm a Day is quite different from the 2000 version, which again is totally different from the 2009 version. Real fans want them all.
All of this is do-able today. It’s not about technology, it’s about attitude, and the ability to communicate, to lead. For a cause-driven band like Steel Pulse, this is their opportunity to shine.
And let your fans share in creating and spreading your experience.
Now let’s take a quick look at the business world.
VG, as he’s called affectionately, is an author and well known strategist. His latest article in the Harvard Business Review, co-authored with Jeffery Immelt and Chris Trimble, has been a huge success - introducing the world to a concept called reverse innovation.
What we’re doing now is building his engagement strategy - through his innovation newsletter. The idea is to start a conversation about innovation with the people most interested in this topic.
A small step to start, but I know from experience that a “simple” newsletter can drive over 50% of monthly sales online.
The great news is anyone can build an attention platform like this. And if you have something important to say, your platform will bring you the attention you deserve.
It may even elect you President!
As I was finishing up on this, I just saw a tweet from John Hagel on author platforms (read here). Again, if Apple can help an author or musician build that platform, then Apple will “lock-in” that artist for life. Same goes for Amazon.com. The distribution model for media is changed forever, period.
This is a digital reprint of an interview I did about ten years ago with UC Berkeley’s Hal Varian. At the time Varian was co-author of a bestseller: Information Rules: A Strategic Guide to the Network Economy; it’s still worth reading today. Today he’s the Chief Economist at Google. There are still a number of good things in this interview that the media companies could learn from… (I’m a bit embarrassed by the silliness of my questions, but hey.)
I suppose we should begin by asking you for your definition of “information” and what you call “information goods”.
When we talk about information goods, we mean anything that can be digitized. Text, pictures, moving images, sound, all the media that can be delivered over a digital connection. Some people call them digital goods.
Information goods have some interesting properties. On the supply side there’s normally a big fixed cost to create the first copy, of say a movie, and then a negligible cost to create additional copies. On the demand side, the interesting feature is that you don’t really know what information is until after you’ve consumed it. So you have to experience it to know what it is.
When you’re selling information, you’re dealing with how do you give free samples, how do you give part of it away, how do you establish a reputation so people will purchase the information you’re providing, etc. etc.
I read about a travel publishing company that put its contents on-line, and their book sales went up, because people wanted the books with them when they traveled…
Yes. Another example is the National Academy of Sciences. They found when they put all their content on line and people could actually look at what the content was, they were more likely to buy.
What are some of the techniques you find companies use to create and sell information products? How do you sell an information product to different customers at different prices? How do you find out what the different customers will pay? Can you do this on a website?
The trick is to “version” your information product: construct a product line of your information goods that will appeal to different market segments. A common way to do this is to use delay: issue a book first in hardback, then, a few months later issue a cheaper edition in paperback. The people who are really interested will get the hardback, whereas people who are only casually interested will wait.
We see financial sites on the Web that sell real-time stock quotes, but give away quotes that are 20-minutes delayed. A movie first comes out first in the theater then six months later in video.
Then there are other things, user-interface, for example. If you look at Dialog, which is a search company, they have two types of search engines- one is a professional search engine, with Boolean searches and all sorts of options, and then they have an “ordinary-person” search engine, with a stripped down interface. It’s nice because the ordinary person wants to use the simpler interface, while the paying professional uses the professional interface. So there isn’t any cross-market cannibalization.
Other dimensions on which to version your product are user convenience, image resolution, capability, features, tech support, etc.
You mention Gresham’s Law of Information in your book. What is it?
Gresham’s law said “bad money crowds out good”. We coined “Gresham’s Law of Information” which says “bad information crowds out good”. Low-quality, cheap information can displace high-quality, authoritative information: look what happened with Encarta and Britannica. However, Britannica is now fighting back and has come out with products that are much better suited to computer use. Smart consumers will look for quality information.
Your example of the struggle between Encarta and Britannica, how Britannica lost out to the upstart $49 Encarta…
Right, although they’re coming back. They’re doing some clever things now. What happens there is the incumbent in the industry has a very low marginal cost, so they should be able to beat the entrant but they can’t quite change their business model. It’s hard. Telephone companies are having this problem, the print/publishing media is having this problem, TV networks have this problem vis-a-vis cable.
(This was before Wikipedia!)
Since there’s a high cost of innovation and a low cost of imitation on the web, isn’t it harder to keep “first-mover” advantages?
You’re right, we talk about this — the competition is only a click away. But the clever company, which has that first-mover advantage, will try its best to create “lock-in” for their customer base. For example, look at what Amazon has done- one click ordering, keeping information on what you purchase so they can recommend books to you. If Amazon is recommending good books to me and I want to switch to say Barnes & Noble, I have to start all over.
Another good example of that is e-toys. You put in the birthday of your nephew, your neice, and your cousins, whatever, and they send you a reminder that your nephew’s birthday is coming up and here’s a nice stuffed rabbit that’s very popular with children in his age group.
Can you tell us a little more about your lock-in strategies?
Since the competition is just a click away on the Web, it pays companies to invest in building customer loyalty. The best way to do this is to produce a product that is so much better than the competition that they don’t want to switch! But there are other ways too, such as loyalty programs, like frequent flyer programs that reward frequent purchasers.
What about lock-in strategies for suppliers and partners?
What we were thinking about there was that if you have a group of loyal customers that are purchasing your products, and there may be other complementary products that they would also purchase, but you may not be the best firm to supply that. So then what you do is sell access to your customers.
The portal companies are doing this. For example, I go to Yahoo, and Yahoo charges other companies to have access to me. Let’s say e-toys wants to move into baby or children’s clothes. They might not do that themselves, but they could partner with other companies that do that.
So once you have a loyal customer base, then you can sell access to that customer base for other products that complement what you are selling.
What about the dangers in this, with privacy issues?
It’s certainly convenient for me to be reminded when my anniversary is or my nephew’s birthday or something. That’s a service, a good thing. Of course they can use the information about me in ways that could be detrimental- they could sell it to mailing lists and I get deluged by email. So the trick is to make sure that consumers give their consent; you want to know exactly how the information is going to be used by the company in question. There are companies like e-trust which meet a very important need.
I was looking at ANX, the auto-industry supplier network, and I found out that Chrysler, despite its enthusiasm during the pilot, isn’t part of the production version of ANX. And if you go to the Chrysler supplier website, you find they’ve created tons of business applications. So when does it make sense to join a standards organization and when does it make sense to go it alone?
There’s this fundamental equation that says that the value to you is your share of the market value times the size of the total market. So some of your actions, like standardization, can increase the total size of the market, but it can decrease your market share because it creates more competition. So you have to trade-off these two effects.
So you’re saying if the total size of the market gets bigger, and you make a bigger profit despite a lower market share, then you are on to something… How do you protect intellectual property on the web? Will the current move of providing patent protection to internet business models help or hurt the future of e-commerce?
The point is to maximize the value of your intellectual property, not maximize its protection. You can charge a lot lower price for content on the Web because you can reach a much larger audience.
I’m quite unenthusiastic about patent protection for Internet business models and feel that it will retard progress in this area.
(Like I said, my questions are quite stupid, but the versioning of information goods - that’s still something the media companies can learn about! This cartoon was also done about the same time…)
Finally, to get you up to speed, here’s a decent interview with Prof. Varian with the global-warming deniers at Superfreakonomics >>
In their article Innovation in Turbulent Times, Darrell Rigby, Kara Gruver, and James Allen make the case that the key to growth is pairing an analytic left-brain thinker with an imaginative right-brain partner:
Fine, but the problem is that in most "rational" industries - dominated by "maximize shareholder value" thinking, there no room at the top for the creative thinker. In fact, I would argue that most companies are too sharply skewed to the left brain. The CEO, CFO and the heads of all the business units are too focused on P&L to think outside the proverbial box.
American style management has been under some considerable stress these last few years. Now the nerds at Bain have some advice for the CEO. Apparently there are six dilemmas CEOs must face and - surprise! Bain has uncovered six strategies to help the CEO manage these dilemmas. Check out the cool diagram below:
I personally think the CEOs would be better off following VG's 3 box strategy and executing on it. This other stuff is fine, but it doesn't seem to be the stuff of great leadership. Nowhere do we see anything about creating great products or obsessing over your customers or sustainability. I bet Steve Jobs and Jeff Bezos do not manage their companies this way.
To me, this is just the first step to being truly global (as they say at Thunderbird). With business commitments at a local level, social commitments will surely follow.
Now let's see some "ecomagination" in action and build portable solar/wind electrical generators for off-grid villages at an affordable price-point. Right, Bob?
I have to say the story of Jung's Red Book is fascinating.
But what really stunned me was what the book actually looks like:
A work of art, surely, but we are about to learn a lot more about dreams. And reality.
Do you have a book of dreams?